The introduction of formal insurance and its effect on redistribution

Dan Anderberg and Karlijn Morsink

Journal of Economic Behavior & Organization, 2020, vol. 179, issue C, 22-45

Abstract: Transfers motivated by altruism, guilt, and norms of giving play an important role in supporting individuals who suffer losses due to risk. We present empirical evidence from an artefactual field experiment in Ethiopia in which we introduce formal insurance in a setting where donors make redistributive transfers to recipients who experience losses. We find that donors tend to reduce their transfers to recipients who are offered insurance, whether or not they take it up. When insurance is rejected by a recipient, transfer reductions are larger for donors who firmly expect that the recipient would take up insurance. The results are consistent with a framework in which the introduction of insurance erodes norms of giving by revealing differences in the extent to which individuals value precautionary behavior with respect to risk-taking. Welfare calculations show that when formal insurance is introduced, the welfare of those who fail to take it up may be reduced.

Keywords: Formal insurance; Transfers; Norms of giving; Guilt (search for similar items in EconPapers)
JEL-codes: D64 D91 G22 O16 O17 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268120302638
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:179:y:2020:i:c:p:22-45

DOI: 10.1016/j.jebo.2020.08.005

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().